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Guest opinion: The poor keep their money for luxuries

By Brian T. Schwartz

Posted:
06/26/2011 01:00:00 AM MDT

"Let them drink beer, while you pay." This is how Colorado taxpayers should interpret Governor Hickenlooper's recent veto of Senate Bill 213. For some families, SB 213 would have increased the single-child enrollment fee to $20 per month. This is how much the lowest income U.S. households spend on alcohol.

For families earning less than 250 percent of the federal poverty level, CHP+ currently charges a $25 annual enrollment fee for one child. SB 213 would have increased the fee to $20 per month for families with incomes between 205 percent and 250 percent of the FPL. Additional children would cost $10 per month, with a $50 cap.

For comparison, twenty-two states charge at least $20 for this income range, while 28 charge at least $10, reports StateHealthFacts.org.

To justify his veto, the governor trots out a familiar boogieman: the cost-shift from the uninsured. He claims that the department running CHP+ "estimates" that 2,500 kids would lose CHP+ coverage, and says they "would likely become uninsured." Cost savings from increased fees would be "out-weighed by ...costs of children ...ending up ... in emergency clinics."

This is wrong. First, many parents in this income range can afford insurance for their kids. Second, the uninsured pay more of their emergency medical bills than CHP+ does.

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CHP+ is a State Children's Health Insurance Program, which "have consistently paid less per (emergency department) visit than .. the uninsured," concludes a 2008 study published Academic Emergency Medicine. In the study, 60 percent of the uninsured had lower incomes than the families SB 213 would affect.

Many parents who drop CHP+ enrollment would buy commercial insurance for their kids. For example, when Missouri introduced monthly premiums for its child health plan, Urban Institute researchers found that "increases in other types of insurance coverage prevented an increase in the share that were uninsured."

CHP+ and its counterparts in other states "crowd out" commercial insurance such that parents drop commercial coverage to enroll. MIT economist and past Obama advisor Jonathan Gruber finds a "crowd-out rate of about 60 percent." The reverse is also true. When parents drop CHP+, some buy insurance. The Congressional Budget Office reported that in 2005, between 50 and 77 percent of kids in households with incomes affected by SB 213 had commercial insurance.

Another reason to expect that many CHP+ eligible parents can afford insurance is how much they spend on indulgences. A single parent with a $36,000 income is eligible for CHP+. According to the Bureau of Labor Statistics' Consumer Expenditure Survey, households earning up to $30,000 spend more than $190 per month on alcohol, tobacco, sweets, and entertainment.

Also realize that the governor's "2,500 kids" figure is no "estimate," but merely an assumption by the Colorado Legislative Council. Even with this assumption, and assuming -- despite evidence -- that all 2,500 kids become uninsured, and then assuming that their parents don't pay ER bills, increased fees would still save taxpayers money.

The cost-shift from the uninsured is at most "1.7 percent of private insurance premiums," concludes a Kaiser Family Foundation report. This is about $80 for a typical Colorado employer-sponsored plan covering one employee. Adding 2,500 uninsured kids increases Colorado's uninsured population by less than half of percent. The $80 cost-shift would rise by 25 cents.

The savings is at least four times more. According to StateHealthFacts.org, annual CHP+ spending is almost $1300 per enrolled child. A decrease of 2,500 enrolled children would save taxpayers more than $3 million, or about one dollar per Coloradan with commercial insurance.

Remember, this estimate ignores factors that increase taxpayers' savings: Uninsured patients pay more of their emergency department bills than CHP+ does. Many families with income above twice the poverty line buy insurance for their kids. These families also spend, on average, around $200 a month on indulgences. They can certainly afford to pay $20 a month for their child's health plan, while authorities make taxpayers pay the rest.

CHP+ officials will soon propose changes to CHP+ fees and possibly co-payments, which are also extremely low. Maintaining current fees would not only be an injustice to taxpayers, but also an insult to eligible parents. The fees imply that parents value enjoying life's amenities more than their own children's health.

Brian T. Schwartz is a member of the Camera's Editorial Advisory Board and a research associate for the Independence Institute.

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